Here is a quote from Rinjiro Shirata, 9th Dan, from Aikido Masters: "[O'Sensei] occasionally would drink a little, but his face would turn red. Once in awhile he would puff on a cigarette for fun but he didn't inhale. He had a playful streak in him. When he became excited, he would sometimes puff cigarettes."

So...smoked, but didn't inhale?

My sensei forbids his black belts to smoke because of the obvious health hazards and, I believe, because he observed so many Japanese Aikidoka and others have had their lives cut short by this terrible habit.